Whenever companies do a round of surveys, one of the things that they always get feedback on is “price.” Customers will often say that their products are good, but that they object to the price, believing that they aren’t getting real value for money from what’s on offer.
The problem is that it’s not price that’s important: it’s the value that your customers are deriving from the products that they are buying. That’s why so many companies put so much effort into fully explaining their products to make sure that customers understand what they’re getting. Often companies will ring up customers after they’ve purchased a product from them, just to make sure that they’re using it right and that they’re getting the maximum value possible out of it.
Often, as a business, you’re not prepared to compromise on price, especially if doing so would lead to a reduction in the quality of your product. So what can you do to make sure that your customers pay full price, even though they don’t seem to be happy with prices at the moment? Check out these anchoring and price-positioning strategies to win more customers and build your market share.
Create The Visual Perception Of Luxury
When businesses want to sell a product to a customer at a higher price, context matters. Let’s face it: people are unlikely to part with thousands of dollars to buy a luxury watch in Walmart. They are, however, much more likely purchase a watch in, say, a Swiss jeweler, precisely because the jewelers has created a sense of luxury in the visual appearance of the brand.
There are plenty of brands that do this incredibly well right now. These include brands like Dior, Tiffany’s and Bentley. The fact that the brand is selling a premium price product is in itself an inducement to spend more money.
Businesses who want to drive traffic and sales in higher-value options need to create a sense of luxury and exclusivity around their products. Luxury-as-a-service brands have to focus on crafting a sense of luxury both in store and online, in order to foster perceptions that people are paying for something that is exclusive. There’s no point trying to charge a high price for something that looks like the generic alternative, even if in practice, it offers much more value.
Create Value In The Processes That Made Your Product
There’s an old idea in marketing that businesses should go into detail about how exactly they made their product, especially if it’s premium. Take Himalayan salt, for instance. Yes, it’s pink – but it’s also exactly the same as the rest of the salt you can buy in the supermarket. Yet people are willing to pay more for a product that essentially tastes the same, all because of the process of extracting it. There’s something rather cool about the fact that a company goes out and mines salt from the Himalayas, way up there in the stratosphere.
Other companies emphasize parts of their production processes which make them unique. Perhaps they’ve got a unique paint machine, an example of which you can find here from Reliant Finishing Systems, that delivers a quality finish to their product that few other manufacturers have. Or maybe they use hydroforming to make bike frames, like Niner Bikes do, offering a superior finish to other bicycle manufacturers.
The key here is to emphasize everything that went into your product that makes it better than whatever else is out there on the market. If your product took 17 writers, 12 technicians, 15 engineers and 20 designers all with over 500 years of combined experience between them, then make a song and dance about it in your marketing material. People love the idea that a huge amount of work has gone into a product because it helps them to psychologically justify parting with more money. Having a story behind a product makes it more interesting, and solidifies the value proposition.
Take the vacuum company, Dyson. Dyson has managed to do the impossible: turn an otherwise boring business into something that the entire world has heard about. So far, they’ve grabbed 27 percent of the US vacuum market share, and many analysts believe it has everything to do with the way that they market to their customers. Yes, vacuum cleaners are boring. But Dyson has made them interesting by listing every detail about their products on the website, including the fact that the company has built more than 5,100 prototypes in the search for the perfect vacuum. It’s details like these than convince consumers that, yes, it is worthwhile parting with extra cash, especially if it means getting something that delivers higher value.
Divide Big Payments Into Smaller Fees
Back on the subject of psychology, it’s worth pointing out that it makes a big difference how you present your prices. It’s much easier saying that something will cost a dollar a day than it is to say that you’ll be charging customers $30 a month, or $360 a year. One off big payments are difficult to stomach, whereas lots of smaller payments are a lot easier.
Take charities, for instance. Charities will pitch to donors by saying something like “you can feed a child for just a dollar a day.” The point of the charity message isn’t, of course, to get you to make a dollar payment every day. Instead, it’s to sell you on the idea that a dollar a day isn’t much money and then take $30 from your account every month by direct debit.
Companies can do this all the time. For instance, businesses that offer premium online marketing services might list their monthly packages, and then next to them put something like “only $4 a day for all your marketing needs.” Google famously do this for their Adwords packages, where businesses literally pay by the day and set their own budgets.
Build A Calculator
Most of your customers, especially your business customers, will want to know what return they get from investing in your product. But strangely, the majority of companies don’t actually do this. This means that when paying for a premium service, they don’t know the return that they’ll get above and beyond the regular service. To make your products look like a bargain, list their financial benefits from investing in your product.
Take accounting for instance. Let’s say you charge a company $2,000 a year for your premium accounting services. To most business, that will seem like a lot – after all, they can get a basic service for around a quarter of that. But a top-notch accounting service might include facilities that allow customers to save much more money in the long-run. $2,000 for accounting services seems like a lot of money to pay. But $2,000 for accounting services that save a business $10,000 is a no-brainer.
Make Dollar Signs Physically Smaller
Cornell University researchers recently did a study to find out whether people were willing to spend more when dollar price signs on restaurant menus were removed. They found that people did indeed spend more, leading to speculation that removing the dollar sign altogether when listing premium products might be a good strategy.
Further studies seem to corroborate what the university researchers found. Another showed that when the typeface was small, people were incentivised to spend more compared to when it was physically larger. Big fonts usually mean big prices, so many the physical size of a price was enough to put people off.
Make Intangible Products More Tangible
Have you ever wondered why people still buy physical DVDs or games, even though there is now a myriad of services that deliver them digitally? Marketing experts think it’s all down to the fact that people prefer to get something tangible in exchange for their money.
But what about companies that sell stuff that is inherently intangible, like gym memberships? What should they do then?
A company called Curves found that one of the problems that they were having was that they weren’t connecting the experience of buying a gym membership online with something material in return. The problem they had was that their customers only started experiencing the benefits of joining a gym once they made their first visit. They decided, therefore, to send a goody box, worth $50, to all new customers in exchange for the membership fee. This helped the online buying experience feel more tangible, connecting customers to the gym through real products designed to help them get healthy.
Normalize Your High Prices
High-end companies have an incredible ability to make spending a lot of money on their products seem normal. Take a brand like Lacoste. It probably only costs them $3 to make a ship one of their polo shirts to western markets, but they’ll charge $40 for it nonetheless, all thanks to what the brand means.
What about Apple? They’re also masters at it, making it seem reasonable that everybody pays $600 for a smartphone that costs less than half that to actually produce.
The way regular companies normalize their prices is to use social proof. They get their existing customers to say in testimonials why they were willing to spend more on their product, and then make the whole thing seem reasonable. After all, thousands of people wouldn’t use a service that was overpriced, would they?
